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By Kevin Buckland
TOKYO (Reuters) -Stocks fell and bond yields slid on Tuesday in Asia with investors ducking for cover as new U.S. tariffs on Canada, Mexico and China took effect, threatening to escalate global trade tensions.
The risk-sensitive Australian dollar slid and crude oil wallowed near 12-week lows, while bitcoin languished around $86,000 after erasing the surge to the cusp of $95,000 that started the week.
Sterling held close to a 1 1/2-month high and the euro was also firm as European leaders drew up a Ukraine peace plan to present to Washington.
Japan's Nikkei dropped 1.6% and Taiwan's benchmark lost 0.5%.
Hong Kong's Hang Seng fell 0.4%. Mainland blue chips eased 0.2%.
Asian equities tracked the biggest losses on Wall Street this year from overnight, with the S&P 500 sliding 1.8% and the tech-heavy Nasdaq dropping 2.6%.
However, U.S. futures pointed about 0.2% higher, signalling the sell-off may peter out later in the global day.
Europe looked headed for a lower open though, with STOXX 50 futures pointing down 0.8%.
Investors turned sharply more risk averse after U.S. President Donald Trump confirmed on Monday that 25% tariffs on Canada and Mexico would go into effect from 0501 GMT on Tuesday, along with a doubling of China levies to 20%.
Market players were concerned about the fallout for the U.S. economy as well, particularly amid a run of soft data in recent weeks.
Those worries escalated on Monday with figures showing factory gate prices jumped to a nearly three-year high and materials deliveries were taking longer, suggesting that tariffs on imports could soon hamper production.
However, Asian stocks pared initial steep losses, finding some comfort in the measured reaction from Trump's tariff targets, although Beijing did immediately announce reciprocal tariffs, as did Ottawa.
Higher China tariffs "will likely hurt the U.S. itself as it needs cheap Chinese products to bring down inflation," said Wang Zhuo, partner of Shanghai Zhuozhu Investment Management.
Likewise, "higher tariffs on U.S. agriculture products will also negatively impact China", but countermeasures are politically necessary "so it would be wise to make some symbolic move without triggering an escalation in tensions", Wang said.
The Canadian dollar and Mexican peso weakened, and the Aussie sank to a one-month nadir.
However, China's yuan bounced off its lowest level since February 13 in offshore trading with the People's Bank of China continuing to guide the currency firmer via the official fixing.